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Property Rights and Investments: An Evolutionary Approach

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  • Luciano Andreozzi

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Abstract

When contracts are not enforceable, or property rights are not clearly defined, individuals might lack an incentive to carry out costly investments even when they are socially efficient. Some recent contributions such as Ellingsen and Robles (2002) prove that this problem might be less dramatic than standard economic models would suggest. They propose evolutionary models in which only efficient equilibria can be (stocastically) stable. In this paper we show that these results are not robust with respect to the introduction of individual heterogeneity. When individuals have different cost functions, stochastically stable states are inefficient, even when they induce a positive (suboptimal) level of investment.

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Bibliographic Info

Paper provided by Department of Economics, University of Trento, Italia in its series Department of Economics Working Papers with number 0822.

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Date of creation: 2008
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Handle: RePEc:trn:utwpde:0822

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Keywords: Specific Investment; Evolution; Fairness; Heterogeneous Agents;

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Cited by:
  1. Kevin Hasker, 2014. "The Emergent Seed: A Representation Theorem for Models of Stochastic Evolution and two formulas for Waiting Time," Levine's Working Paper Archive 786969000000000954, David K. Levine.
  2. L. Bagnoli & G. Negroni, 2013. "Egalitarianism. An evolutionary perspective," Working Papers wp888, Dipartimento Scienze Economiche, Universita' di Bologna.

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